Broker at centre of NSE algo controversy challenges bourse in Delhi HC

Delhi-based OPG Securities, the brokerage at the centre of the algorithmic trading controversy on the NSE, has moved the Delhi High Court, seeking certain documents from the stock exchange.

OPG Securities is one of the brokers named in a Deloitte forensic audit report to have benefitted from preferential access to the NSE’s trading engine, allowing it execute trades ahead of other trading members. While the Deloitte report does not specifically mention it, many brokers allege that OPG and a few others were able to do this by colluding with some officials in the IT systems department of the NSE.

The NSE’s Disciplinary Action Committee had issued a show cause notice to the broker on February 14, asking it to explain why it had logged on to the secondary server despite several warnings.

OPG’s contention is that it was not warned by the NSE. OPG’s counsel Amrita Panda has pleaded to the court to direct the NSE to provide copies of the warning letters.

In addition, OPG has also sought a copy of the Deloitte report which names the firm and some other players of having gained unfair access to the NSE’s trading engine.

An anonymous whistleblower had written to Moneylife magazine in 2015 alleging that some brokers who had availed of the co-location facility offered by NSE, were unfairly benefiting by way of access to a server with the least load. This allowed them to execute their trades faster than even other brokers who had availed of the same facility

In its draft red herring prospectus (DRHP) for an initial public offering (IPO), the NSE had listed as one of the risk factors Deloitte’s observation that its systems were prone to manipulation.

Following a probe by SEBI, NSE has been directed to deposit the revenue accruing from co-location facility into an escrow account till further notice. The regulator is yet to come out with a final decision in the case, a factor that is delaying NSE’s public issue.

Moneycontrol has learnt from sources that as many 18 brokers are being probed for unfair gains from preferred access to the trading engine.

The next hearing is on March 30. In its order, the Delhi High Court has clarified that it “has not considered the relevancy of the information/record” sought by OPG and also said that the NSE’s Disciplinary Action Committee was free to consider the request of OPG.